Homes still unaffordable for many
Despite a decline in prices, Americans aren't finding it easier to buy homes because of rising mortgage rates and relatively stagnant wages, a nonprofit group says.
Home prices may have dipped over the past year, but many U.S. workers would still struggle to afford a median-priced home in many cities, according to a study released today.
"American workers are really not gaining ground, and they're so far behind in the first place," said Barbara Lipman, the research director for the nonprofit Center for Housing Policy, which conducted the study.
The median home price in the 202 biggest metropolitan areas declined 2% in the third quarter of 2006 from a year earlier. But homes actually became less affordable, the study said, as mortgage rates rose and workers' pay did not keep pace.
"The real story is what happened to salaries," Lipman said. "Lower-paid occupations -- such as in retail or home health workers -- their salaries went up only about 3%."
The study said an annual income of nearly $85,000 was needed to afford the median-priced U.S. home.
In the New York area, a $500,000 median-priced home required a $171,000 annual salary. The median-priced home in San Francisco, the most expensive U.S. market, was $759,000, requiring income of $260,000. In less expensive Chicago, the median-priced home cost $254,000, requiring an $87,000 salary.
On the opposite end of the spectrum, Mansfield, Ohio, homes cost a median $85,000, requiring $29,118 in income.
Why families lack health insurance
The study assumed homebuyers needed a 10% down payment and could afford to pay 28% of their income on mortgage payments, property taxes and home insurance.
In reality, many households expend a much higher percentage of their incomes on mortgage payments, Lipman said.
To afford that, consumers cut other expenses, such as for health care and transportation, she said, citing research indicating that the cost of housing is the major reason families lack health insurance.
Other ways families cope with high housing expenses is to work longer hours or extra jobs, or by crowding in more income producers, she said.
Lipman's group found in an October 2006 survey that families that seek to buy less expensive homes in more distant suburbs -- adding to urban sprawl -- pay so much more for transportation that it eliminates the savings.
Though home prices range widely across the country, wages for low-wage jobs -- from teachers to janitors -- are about the same no matter where they are, Lipman said.
The report cited housing-aid programs offered by some big-city hospitals that have plenty of modestly-paid workers.
"For the low- to moderate-income individuals that we're talking about, they're not going to be helped by marginal declines in home prices," Lipman said. "The only way to address the problem is to create more affordable (homes), which may mean higher density units, townhouses and condos."